Generation Z Consumers Might be Stiff Challenge for Brand Loyalty

Businesses will have to earn the brand loyalty of shoppers born after 1994, a new study has found. “The Next Generation of Retail,” released by experiential marketing firm Interactions revealed that the value-conscious Generation Z promises long-term opportunities for repeat sales, but only with effective customer experience and customer loyalty program management.

Generation Z is a quarter of the U.S. population, with a buying power of $44 billion. The value of that market will continue to grow as more enter the workforce.

“By 2020, Generation Z will make up 40% of the population in the world’s biggest markets, including the U.S., Europe, China, India, Brazil and Russia,” the report said.

“The Next Generation of Retail” examined the shopper profiles, in-store/online shopping attitudes, brand loyalty and tech/social media preferences of 2,000 U.S. consumers between the ages of 14 and 19.
“Generation Z… this cohort of constantly connected, multitasking, technologically-savvy do-gooders, is getting ready to turn the retail industry on its head,” the report said.

The May 2016 survey found more than 80% of Generation Z would switch from their favorite brand if they found a similar product with better quality or a lower price.

It also found that 62% would prefer to spend money on experiences, instead of material goods. Nearly two-thirds also prefers shopping in a store, rather than online, when given the choice.

Rekha Ramesh, Global Head of IT and Digital at study sponsor Interactions, told Loyalty360 that Generation Z’s shopping habits may change as they mature.

“It’s important to remember that this generation has seen the effects of a struggling economy and their outlook on money is much different from that of Gen X or Baby Boomers,” Ramesh said.

“As Generation Z’s disposable income increases, they will naturally spend more money on material goods, especially as they start living on their own (e.g. buying furniture, cars etc.).

“Gen Z values things like travel and spending time with friends, so as this generation evolves, we wouldn’t be surprised if they become one of the least materialistic generations of our time,” she said.

Generation Z’s always-connected lifestyle is reshaping the shopping experience, as iBeacons allow information to be pushed onto customers’ mobile devices when they are in the store and ready to buy. Store layouts also have been redesigned with shopper footpath information obtained from iBeacons.

The percentages of Generation Z shoppers who research product information on a retailer’s website and on social media are nearly equal --- 56% and 58%, respectively. This makes social media pages as important as company websites, the report said.

“Our study found that Facebook is the social media powerhouse for the next generation, and they use it to research products and for shopping inspiration,” Ramesh said. “Having presence across top social media platforms will be necessary. Embedding short videos as part of your marketing will appeal to Gen Z as well.”
Ramesh said businesses should not fear engaging in feedback, even if it is negative.

“Gen Z enjoys sharing product reviews online, and they expect a two-way conversation in that space. Proactively responding and engaging will impress them and help build positive brand loyalty,” she said.
The report noted that Generation Z shoppers expect stores they frequent to be clean, have friendly and knowledgeable associates and provide a positive checkout experience. They also want technology available for use in the store and channels to provide for customer feedback.

“It’s important to note that Generation Z is very aware when it comes to the overall shopping experience,” Ramesh said. “Gone are the days when you simply had to get people in the store – retailers and brands need to go above and beyond to engage with this generation, whether it’s through technology or interactive demonstrations. While Generation Z is not the most brand loyal, providing them with a positive customer experience and catering to their preferences will help increase that loyalty as this generation grows.”

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